16 | Basic Accounting ‘SCORE: | NAME: PROFESSOR: ‘SECTION: Multiple Choice it it columns of the trial 1. Which of the following errors will not cause the debit and credl balance to be unequal? a. A debit entry was recorded in the wrong account b. A debit was entered in an account as a credit. ial balein'e © The account balance was carried to the wrong column of the trial d._ The balance of an account was incorrectly computed. 2. An entry with more than one debit or credit is called a @ compound entry, b. double entry, c. dual entry. d. multiple entry. 3. Which ofthe following accounts will nt affect owner's equity? Advertising Expense ©) Land ¢. Owner's Withdrawals d. Revenues 4. Which of the following accounts has a normal debit balance? a. Owner's Capital ® owner's withdrawals ©. Salaries Payable d.Unearned Revenues 5: Which of the following errors will cause the trial balance to be out of balance? a. A debit entry was entered in the wrong debit account. b. An entire transaction was entered in the Beneral journ; & An entire transaction was omitted from the genera} jo al 8s PS3 instead of P35. The balance of an account was incorrectly computed ural, 6. Which of the following describes the classificati Cabrera, Capital? on and normal balance of Jay a. Asset, debit b. Expense, debit c. Owner's equity, debitRecording Business Transactions | 4-27 d. Revenue, credit ©) None of these 7. Which of the following describes the classification and normal balance of the Service 8. 9. 10. Revenues account? a. Asset, credit b. Asset, debit c. Capital, debit d. Expense, debit Revenue, credit Which of the following is an’asset account? a, Insurance Expense ® Office Equipment c. Sales d. Supplies Expense If a P4,700 cash purchase of supplies is recorded as a P5,700 debit to Supplies Expense and a P5,700 credit to Cash, the result will be that @) Supplies Expense will be overstated and Cash will be understated. b. the Cash account will be overstated. c. the Supplies Expense account will be understated. d. the trial balance will be out of balance. If Accounts Receivable has debit postings of P580,000, credit postings of P440,000, and a normal ending balance of P480,000, which of the following was its beginning balance? a. P620,000 Cr. b. P340,000 Cr. ¢._ P620,000 Dr. P340,000 Dr. 11. When collections are made on Accounts Receivable, 12, a. owner's equity increases. b. total assets decrease. total assets increase. total assets remain the same. Which of the following accounts has a normal credit balance? (@) Advertising Revenues B. Interest ExpenseOwner's Withdrawals d. Service Vehicle not yet received payment, it i s 13. When a company has performed a service but ha: : ice Revenues. debits Accounts Receivable and credits Service ‘i ble. debits Service Revenues and credits Accounts Oe ©. debits Service Revenues and credits Accounts d. makes no entry until the cash is received. issuing a promissoy 14. A P200,000 machine is purchased by paying P50,000 Ge and ry Note for the remainder. The journal entry should include a credit to Machinery. credit to Notes Payable. ©. credit to Notes Receivable. d: debit to Cash. 15. The chart of accounts is a table of contents for a a. financial statement. b. journal. ledger. trial balance. 16. Which of the following classifications of accounts has/have a normal credit balance? Liabilities ® Revenues and liabilities ©. Revenues d. Withdrawals e. Allof these ‘ 17. A purchase is recognized in the accounting records when payment is made for the item purchased, the buyer receives the sellers bill, the purchase requisition is sent tothe purchash ‘ing de d. title transfers from the seller to the buyer, '® “@Partment. 18. The primary purpose of the trial balance is to test the analysis of transactions, e equality of debit and credit balances in the ledger. equality of debit and credit entries in the ous d. recording of transactions, .Recording Business Transactions | 4-29 19. Which of the following accounts might be placed first in a proper journal entry? @) ‘Bonds Payable, when it has been decreased B. Cash, when it has been decreased ¢. Interest Income, when it has been increased d.Unearned Revenues, when it has been increased 20. Which pair of accounts follows the rules of debit and credit in the opposite manner? a. Advertising Expense and Land b. Interest Payable and Owner's Capital Owner's Withdrawals and Medical Revenues d. Prepaid Insurance and Owner's Withdrawals. 21, Which of the following accounts would be credited in a proper journal entry? @ Accounts Receivable, when it has been decreased b. Owner's Withdrawals, when it has been increased ¢. Salaries Expense, when it has been increased d. Salaries Payable, when it has been decreased 22. For which of the following accounts would a related Accumulated Depreciation account be recorded? Land Office Equipment ¢. Office Supplies d. Prepaid Rent . 23. The process of transferring journal entry information from the journal to the ledger iscalled : a. analyzing. b. footing. ¢. journalizing. posting. 24. Debits to expense accounts signify decreases in capital. increases in assets. c._ increases in capital. increases in liabilities. a 25. Which of the following accounts is decreased with a credit?10_| Basic Accounting a. Advertising Revenues b. Owner's Capital © Rent Expense d. Unearned Art Revenues “oe it postings of P140,000, ang i et 0 26. If Accounts Payable has debit postings of 170,000, cré ‘allowing was its beginning a normal ending balance of P60,000, which of the balance? a. P30,000Cr. b. P30,000 Dr. ©) P90,000 cr. d. 90,000 Dr. 27. Apurchase of supplies on account should be recorded as a. adebit to Accounts Payable and a credit to Supplies. a debit to Supplies Expense and a credit to Accounts Payable. ©. a debit to Supplies Expense and a credit to Accounts Receivable. d. a debit to Supplies Expense and a credit to Cash. 28, ‘The Owner's Withdrawals account appears in a. both the income statement and the balance sheet. b. the balance sheet only. c._ the income statement only. the statement of changes in equity only, 29. Which pair of accounts follows the rules of debit and credit in the same manner? a, Owner's Capital and Rent Expense b. Prepaid Rent and Advertising Expense : c. Repair Expense and Notes Payable Service Revenues and Equipment Rentals Revenues 30. Which of the following accounts has @ normal debit balance? a. Art Revenues b. Mortgage Payable cc. Unearned Art Revenues Unexpired Insurance 31. Which of the following errors will cause a trial bala nce to be out of bal, lance? a. Forgetting to enter an entire transaction into the journal b. Incorrectly recording the purchase of la ies Ind for credit to Land " €8sh as a debit to Cash and 8Recording Business Transactions | 4-31 Posting a debit to Land as a debit to Machinery Placing a debit balance amount into the credit balance column of the ledger 32. Acredit may result in a. a decrease in a liability account. b. a decrease in the Capital account. © an increase in a liability account. an increase in an asset account. 33. The Posting Reference column in the general journal is‘used to show that an account has been posted to the ledger when which of the following is placed in it? Account number b. AnX c. Journal number d.. Journal page number 34, When a T-account has several items on both sides, the balance of the account is written on the side with the greatest number of items. ‘on the side with the larger total. con the side with the least number of items. d. on the side with the smaller total. 35. A debit may signify a decrease in a liability account. a liability and a revenue account. ¢. anasset account. d. an asset and a revenue account. €. a revenue account. 36. AP1,000 debit item is accidentally posted as a credit. The trial balance column totals therefore will differ by a PO. b. PSO. c. P1,000. @) 2,000. 37, Which of the following errors will not cause the debit and credit columns of a trial balance to be unequal? A debit was posted to an account as a credit. o Ajournal entry was accidentally posted twice. ©. Only part of a journal entry was posted d. The trial balance was incorrectly summed.4-32 | Basic Accounting to be out of balance? 38. Which of the following errors will cause a trial balance G) credit was posted to an account asa debit. b. Ajournal entry was accidentally posted twice. . €. The bookkeeper forgot tojournaize a transaction, 4d. The bookkeeper forgot to post a journal entry to , ‘i lance column t 39. A P800 credit item is accidentally posted as a debit. The trial bal ‘tals, will therefore differ by a, PO. b. Pago, c. P800, P1,600, 40. The principal purpose of posting is to ® eenter transactions directly into the ledger. 'b. help determine if the financial statements are ready to be prepared. ¢. help identify errors made in the Journal. d. obtain updated account balances. 41. Which of the following statements is true about a proper journal entry? a. Aline is skipped between each debit and each credit. b. Assets are entered before liabilities, Decreases in liabilities are indented, The Posting Reference column is left blank until entries are posted, 42. Which of the following events does not require an entry in journal form? ® Agreement to perform a service at a future date b. Payment for a service performed previously ©. Performance of a service agreed to at a past date d. Purchase of a one-year insurance policy 43, When a magazine company receives an advance payment for a subscription, it a, debits Cash and credits Subscriptions Revenue, debits Cash and credits Unearned Subscriptions Revenues , ¢. debits Prepaid Subscriptions and credits Cash, " 4, debits Uneared Subscriptions Revenues and credits Cash 44. Which of the following transactions decreases both assets and owner's equity? ‘Advance payment made for insurance ‘Owner withdrawal of cash c. Payment of a liability d. Receipt of a phone bil, to be paid at a later timeRecording Business Transactions | 45, Which of the following transactions increases both assets and owner's equity? a. Owner withdrawal of cash b, Payment received from a credit customer c. Received a bank loan @ Rendered services; payment not yet received 46. Which of the following entries records the withdrawal of cash for personal use by Rosenda Huerto, the owner of a business? * a. Debit Cash and credit Huerto, Withdrawals b, Debit Cash and credit Salary Expense Debit Huerto, Withdrawals and credit Cash - Debit Salary Expense and credit Cash 47. The trial balance will not expose which of the following problems? . Leaving out an entire entry Recording both halves of an entry on the same side ¢. Recording half an entry d. Recording half an entry and leaving out an entire entry €. Recording half an entry and recording both halves of an entry on the same side 48. The general journal does not have a column titled @ Account Balance. b. Date, ©. Description. d. Posting Reference 49. To find an explanation for a transaction, one should look at the chart of accounts. journal. ©. ledger. d._ trial balance. 50. Which of the following gives the correct sequence of accounting procedures? a. Financial statements, journal, ledger, trial balance b. Financial statements, trial balance, ledger, journal Journal, ledger, trial balance, financial statements . Ledger, trial balance, journal, financial statementsSCORE: rE PROFESSOR: Multiple Choice }, the payment shou 1. When an entity pays for goods or services before actual recelpt, ld be recorded as a decrease in Cash and an increase in a. a liability. . anexpense. 2 ne G1 SE iy edz 2. Entries recorded on the right side of any account are called credits. B. debits, c. decreases, d. increases. 3. The manner in which the accountin business is referred to as @ accounting information system, business document. ©. voucher system. 4. special journal, 1g records are organized and employed within a 4. The accounting cycle is @. applicable only to manual systems, b. a process that begins with adjusti the financial statements, © the length of time it takes to complete a set of fi books are closed, @ the sequence of Procedures used by information and to produce financial stat Not to computerized systems, ng entries and ends with the preparation of nancial statement after the @ business to Process economic fements, 5. Aledger is defined as a collection of ® account titles — asset, liability, e b. all income statement accounts. €. all statement of financial position accounts, d. transactions, ‘uity, income and expense accounts, 6. Asimple journal entry @ consists of one debit and one credit, b. consists of one debit and two credits,Recording Business Transactions | 4-35 S888 ————————————— c. consists of two debits and one credit. d. isamemorandum entry. 7. The Posting Reference column in the ledger shows that an item has been posted when which of the following is placed in it? a. Acheck mark b. An*x" The account number d._ The journal page number 8. Which of the following accounts is classified differently from the others listed? a. Accounts Receivable b. Cash © Owner's capital d. Prepaid Rent 9. When owner's equity decreases, one of the following must occu @ aiiabitity increases b. an asset increases ¢. anincome increases 4, withdrawals decreases 10. What function do accounting journals serve in the accounting process? a. Classifying c. Reporting Recording d. Summarizing 11. Which of the following accounting steps is accomplished after the others listed? a. Apply the rules of double entry. b. Post the entry. Prepare the trial balance. Record the entry. 12. Which of the following is a business event that is not considered. a recordable transaction? : @ Acompany pays an employee for work performed. b._A company receives a product previously ordered. A customer inquires about the availability of a service. ‘A customer purchases a service. 13. Which of the following is a business event that is also considered a recordable transaction?2. Acompany hires a new employee. b. Accompany orders a product from a supplier. © Acustomier purchases merchandise. jing department, 4. Anemployee sends a purchase requisition to the purchasing dep: 14. The term footing refers to the @) addition of a column of figures. b. process of obtaining the bottom number in an account. ©. process of obtaining the top number in an account. d. process of posting. 15. The first financial statement that is prepared from the trial balance is the balance sheet. . income statement. ¢. statement of cash flows. d. statement of changes in equity. 16. The equality of debits and credits in the ledger should be verified at the end of each accounting period by preparing a balance report, atrial balance, an accounting statement. d. an account verification report. 17. OF the following errors, the one that will cause an inequality in the trial balance totals is a. failure to record a transaction, b. recording the same transaction more than once, ©. posting a transaction to the wrong account. ® incorrectly computing an account balance. 18. Office supplies are expensed at no time, since they are assets, : when they are consumed (used up). when they are paid for. d. when they are purchased. 19. The first step in recording a transaction in a journal is to record the credit. record the date. c. record the debit. d. write an explanation.Recording Business Transactions | 4-37 20. Which of the following accounts is classified differently from the others listed? @) Art Revenues b. Mortgage Payable c. Notes Payable d. Unearned Revenues Use the following information to answer the questions below. The following is the trial balance for Anselmo Giron Company: Anselmo Giron Company Trial Balance Jan, 31, 2014 Cash 30,000 Accounts Receivable 20,000 Art Supplies 30,000 Office Supplies 50,000 Prepaid Rent 70,000 Prepaid Insurance 50,000, Art Equipment $0,000 Office Equipment 30,000 Accounts Payable P'50,000 Giron, Capital * 150,000 Giron, Withdrawals Advertising Revenues Salaries Expense Utilities Expense Telephone Expense ' 21. If the balance of the Giron, Withdrawals account were P120,000 and the balance of the Salaries Expense account were P50,000, what would be the amount of B? P 180,000 (e) P580,000 c. 370,000 d. P380,000 22. If the trial balance showed a balance of P70,000 in the Giron, Withdrawals account and a balance of P50,000 in the Salaries Expense account, what would be the amount of Advertising Revenues for the period? 330,000 b. 480,000 c. P180,000 d. P430,00038 | Basic Accounting 23. In the trial balance, total assets equal © 330,000. 230,000 c P430,000. d. P410,000. as ; ies Expense account ang 24, If the trial balance showed a balance of P80,000 in aac what would be the a balance of P350,000 in the Advertising Revenues amount of A? a, P500,000 @® Pss0,000 . P450,000 d. 600,000 . 25. If the trial balance showed a balance of P40,000 in the Salaries eaciense ocean a a balance of P300,000 in the Advertising Revenues account, what: e amount of the Giron, Withdrawals account? a. P250,000 b. P190,000 . P140,000 © 50,000 26. Which of the following transactions does not affect the balance sheet totals? @_ Collecting P40,000 from customers on account b. Paying a P300,000 note payable c. Purchasing P50,000 supplies on account d. Withdrawal of P80,000 by the firm’s owner. 27. The accrual basis of accounting recognizes expenses when cash is paid. Q) expenses when resources are consumed as part of Operating activities. revenues when cash is re¢eived. : 4, - revenues when products are produced as part of operating activities, 28. An error of original entry occurs when . a. a correct figure is entered in the double-ent correct ledger account and once in the wron, an incorrect figure is entered on the correct ¢. either the debit entry or the credit entry fo in the wrong class of account. d. None of the above. ‘try accounting records, once in the 1B Person’s account. sides of the correct ledger accounts " @ particular transaction is recordedRecording Business Transactions | 4-39 29. Which of the following statements is true about a proper journal entry? a. All debits are listed before any credits. @ Anexplanation must follow each debit and each credit. c, The name of the month should be repeated for each entry. 4d. The Posting Reference columnis filled in prior to posting. 30. What function do general ledgers serve in the accounting process? a. Classifying b. Recording c, Reporting Summarizing 31. Achart of accounts is a (an) a. accounting procedure manual. b. flowchart of all transactions. journal. list of names of all account titles. 32. A journal entry that contains more than two accounts is called @) acompound journal entry. b. a posted journal entry. c. anadjusting journal entry. d. an erroneous journal entry. 33. When accounting information is accumulated in indi accounts is, jual accounts, a chart of @ a listing of each account that will be used to accumulate information. b. changed each year by an entity depending on the results of operations. ¢. limited to those accounts that will appear in the balance sheet. d. used fo determine whether a debit or credit balance will appear in each of the accounts at the end of the accounting period. 34. Which of the following events would not be considered an accounting transaction? a. Payment of fees to a tax consultant. b, Purchase of print advertising space for a new service. c. Sales of a new product during the first month of operations. Tabulation of the results of a customer satisfaction survey. 35. The primary function of an account in the accounting system is to @ accumulate accounting information. b. determine at what point a transaction should be recorded,10 | Basie Accounting eS ¢, Identify the type of organization. eel 4d, store accounting transactions until they are class regarded as complet 36. When a customer buys services on credit, the contract is regs plete when the bill is presented. the cash payment is received. ¢. the date specified in the contract is at hand. d. the services are rendered, 37. Most companies use a chart of accounts prepared by the Accounting Standards Council b. Bureau of internal Revenue. ¢. company's accounting department. d._ Securities and Exchange Commission. 38. Balance sheet accounts are accounts with debit balances only. @ adjusting accounts, c. permanent accounts. d. temporary accounts. 39. The normal balance of an account is on the a. credit side of the account. b. debit side of the account. side represented by decrease in the account balance. @) side represented by increases in the account balance. 40. When cash is debited, a typical credit is to a. accounts payable. ® accounts receivable. c. expenses. d. withdrawals. 41. Payment of insurance premiums in advance gives rise to a. accrued expense. b. accrued income. prepaid expense. d. unearned income.Recording Business Transactions | 4-41 42. At the end of an accounting period, the equation Assets = Liabilities + Owner’s Equity does not necessarily balance. Which of the following actions balances the equation? @) Add the difference between revenues and expenses to owner's equity. b. Add revenues and subtract expenses from assets. c. Subtract revenues and add expenses to owners’ equity. d, Subtract revenues from owners’ equity and add expenses to assets. 43. Which of the following steps in the accounting cycle are listed in logical order? Journalize the closing entri closing trial balance. b. Post the closing eni closing entries. ©. Post the journal entries to the ledger accounts, prepare a worksheet, and then take a trial balance. d. Prepare the income statement, prepare the statement of financial position and then prepare a worksheet. ;, and then take a post- , post the closing en! s, take a post-closing trial balance, then journalize the 44, The purpose of the ledger is to keep a record of documentation to support each transaction. (b.) maintain a separate account for each balance sheet and income statement accounts. c. make sure that all balance sheet and income statement accounts have riormal balances at all times. d. record chronologically the day's transactions. 45. Which of the following statements is false about a proper journal entry? @® Accounts that are increased are always listed first. b. Aspace should be skipped between journal entries. . Credits are always indented. : d._Itmay have more than one debit or credit entry. 46. Transactions are recorded chronologically in the a. daybook. c. ledger. Journal. d, T-account,4-42 | Basic Accounting ig not an adequate Measure of ring a period ities because i du “ 47. The amount of cash received or paid ieation’s activ the economic consequences of an organi it of activities completed IM 2 previous resu a. cash inflows may represent the ee tivities b. cash outflows may precede or follow the a associated, i Sh. many activities may not involve the use of cas! GW) Allof the above reasons are correct. with which they are ir he owner's Capit 48. Which of the following does not directly or indirectly affect t pital account? a. Earning of revenues b. Incurring of expenses c. Paying an accounts payable @) Withdrawals by the owner 49. Which of the following transactions correctly maintains the equality in the accounting equation? a. To record collections on account, cash and accounts receivable are increased by P160,000. b. To record payment of notes, notes payable is decreased and cash is increased by P70,000. $< Torrecord payment of rent, rent expense and cash are increased by P8,000. @ To record the purchase of computer equipment, computer equipment is increased and cash is decreased by P46,000, 50. Which of the following combinations of trial balance totals Suggest the presence of either a transposition error or a number slide? a, 65,470 debit and P68,170 credit b. P33,220 debit and P35,420 credit ED P25,670 debit and P26,670 credit d. P14,517 debit and P15,477 credit 51. Which of the following accounts probabl woul i Gfeccounts? 'Y would be listed after the others in a chart a. Art Revenues ®) Owner's Capital c. Prepaid Rent d. Unearned Art FeesRecording Business Transactions | 4-43 52, Unearned Revenues are recorded by companies that a, pay money at the time the performance of a service is complete. b. pay money in advance of the performance of a service. s. receive money at the time the performance of a service is complete. receive money in advance of the performance of a service, 53. Which of the following statements regarding a trial balance is incorrect? a Atrial balance helps to localize errors within an identifiable time period. b. A trial balance is a list of all of the open accounts in the ledger with their c balances as of a given date, A trial balance is a test of the equality of the debit and credit balances in the ledger. A trial balance proves that no errors of any kind have been made in the accounts during the accounting period.